Groundz coffee shop uses 4 pounds of a specialty tea weekly, Ask an Expert

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Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $0.25 per pound. It costs the firm $8 to prepare an order. Assume the basic EOQ model with no shortages applies. Assume 52 weeks per year. a. How many pounds should Groundz order at a time? b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizing basis? c. What is the annual ordering cost? Annual holding cost? Why are they equal? d. The current practice is to order for two weeks of demand (8pounds). Which cost will go up and which cost will go down and why?

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Operation Management, Management Studies

Category:- Operation Management
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